Monday 14 December 2015
Tuesday 8 September 2015
Wednesday 17 September 2014
Newsletter from 5th June 2014 and Update
The stock markets are in the news again. After Narendra
Modi’s victory, the stock markets have moved up considerably. While the long
term outlook for the markets continues to be strong, my opinion is that the
recent surge has been overdone. Quite a few stocks are now at over twice the
price they were just 12 months ago. It is a time to consolidate and re-balance,
to have a look at your current holdings and decide your course for the future.
Do be careful about fresh investments and
pass the message on to your friends and family. The media and even the
investment houses tend to recommend investing after the markets have moved up,
often when the time is ripe for a correction. It would be very unlikely to get
even 20% gains from these levels while a fall of the same magnitude on the
slightest bad news (bad monsoon, communal tension etc.) is highly probable.
Three months later, the markets are even higher and seem poised to move up even more. My advice remains the same: re-balance your equity portfolio to about 60%-70% equity and 30%-40% in debt. While the future looks rosier than it has for a while, stock prices have already incorporated that. For the markets to keep moving up steadily from these levels, companies would have to do phenomenally not just well. Anything less, and we could see a correction.
For new investors, I would recommend splitting your investments (long term funds that you have allocated to equity) equally between equity and debt. You can then use every dip to transfer some of the debt to equity. With this strategy you make slightly less profit if the market goes steadily up but you benefit greatly if the market dips.
Happy investing.
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